Generalized Martin Strategy: This is a strategy that involves doubling down on investments when prices drop. The goal is to lower the average cost of the total investment. In the context of trading, this means buying more of an asset as its price falls.
Inputting Low-Cost Assets During Price Drops: The strategy involves investing more into an asset when its price decreases. By purchasing additional assets at a lower price, the average cost of all held assets is reduced.
Reducing Overall Holding Costs: As you buy more assets at lower prices, the average price you've paid for all your assets decreases. This means that you don't need the price to recover all the way to its original value to start making a profit.
Significant Profits Upon Price Rebound: The strategy relies on the eventual rebound of the asset's price. If the asset's price increases again, the assets bought at lower prices will help in generating profits, as the average cost is now lower.
Example with ETH: The example provided illustrates how the strategy works with the cryptocurrency Ethereum (ETH).
User A buys 1 ETH at $3,000.
The price of ETH then falls to $2,000.
User B sees the price drop and buys 2 ETH at this lower price and adds them to the same pool.
The pool now contains 3 ETH with a total spent amount of 7,000(1πΈππ»ππ‘7,000(1ETHat3,000 + 2 ETH at $2,000 each).
The average cost of ETH in the pool is 2,333(2,333(7,000 divided by 3 ETH).
If the spot price of ETH rises to $2,334 or higher, the pool starts to become profitable because the selling price is higher than the average cost price.
